No. L-11827. July 31, 1961.

FERNANDO A. GAITE, plaintiff-appellee, vs.ISABELO

FONACIER,GEORGE KRAKOWER,LARAP MINES
&SMELTING CO., INC., SEGUNDINA
VIVAS,FRANCISCO DANTE,PACIFICO ESCANDOR
and FERNANDO TY, defendants-appellants.
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VOL. 2, JULY 31, 1961 831
Gaite vs. Fonacier
Obligations and Contracts; Conditional
Obligations; Efficacy subordinated to the happening of a future
and uncertain event.—What characterizes a conditional
obligation is the fact that its efficacy or obligatory force is
subordinated to the happening of a future and uncertain event;
so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never
existed.
Sales; Commutative and onerous nature of contract of
sale; Contingent character of obligation must clearly appear.—
A contract of sale is normally commutative and onerous; not
only does each of the parties assume a correlative obligation,
but each party anticipates performance by the other from the
very start. Although the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other
understands that he assumes the risk of receiving nothing for
what he gives, it is not in the usual course of business to do so;
hence, the contingent character of the obligation must clearly
appear.
Same; How doubt in the intention of parties is resolved.—
Sale is essentially onerous, and if there is doubt whether the
parties intended a suspensive condition or a suspensive period
for the payment of the agreed price, the doubt shall be settled
in favor of the greatest reciprocity of interests, which will obtain
if the buyer’s obligation is deemed to be actually existing, with
only its maturity postponed or deferred.
APPEAL from a decision of the Court of First Instance
of Camarines Norte.
The facts are stated in the opinion of Court.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro
Guevarra for defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First
Instance because the claims involved aggregate more
than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner
and/or holder, either by himself or in a representative
capacity, of 11 iron lode mineral claims, known as the
Dawahan Group, situated in the municipality of Jose
Panganiban, province of Camarines Norte.
By a “Deed of Assignment” dated September 29, 1952
(Exhibit “3”), Fonacier constituted and appointed
plaintiff-appellee Fernando A. Gaite as his true and
lawful at-
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REPORTS ANNOTATED
Gaite vs. Fonacier
torney-in-fact to enter into a contract with any individual
or juridical person for the exploration and development
of the mining claims aforementioned on a royalty basis of
not less than P0.50 per ton of ore that might be extracted
therefrom. On March 19, 1954, Gaite in turn executed a
general assignment (Record on Appeal, pp. 17-19)
conveying the development and exploitation of said
mining claims into the Larap Iron Mines, a single
proprietorship owned solely by and belonging to him, on
the same royalty basis provided for in Exhibit “3”.
Thereafter, Gaite embarked upon the development and
exploitation of the mining claims in question, opening
and paving roads within and outside their boundaries,
making other improvements and installing facilities
therein for use in the development of the mines, and in
time extracted therefrom what he claimed and estimated
to be approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided
to revoke the authority granted by him to Gaite to exploit
and develop the mining claims in question, and Gaite
assented thereto subject to certain conditions. As a
result, a document entitled “Revocation of Power of
Attorney and Contract” was executed on December 8,
1954 (Exhibit “A”), wherein Gaite transferred to
Fonacier, for the consideration of P20,000.00, plus 10% of
the royalties that Fonacier would receive from the
mining claims, all his rights and interests on all the
roads, improvements, and facilities in or outside said
claims, the right to use the business name “Larap Iron
Mines” and its goodwill, and all the records and
documents relative to the mines. In the same document,
Gaite transferred to Fonacier all his rights and interests
over the “24,000 tons of iron ore, more or less” that the
former had already extracted from the mineral claims, in
consideration of the sum of P75,000.00, P10,-000.00 of
which was paid upon the signing of the agreement, and
“b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first letter of credit
covering the first shipment of iron ores and of the first amount
derived from the local sale of iron ore made by the Larap Mines
& Smelting Co., Inc., its assigns, administrators, or successors
in interests.”
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VOL. 2, JULY 31, 1961 833
Gaite vs. Fonacier
To secure the payment of the said balance of P65,000.00,
Fonacier promised to execute in favor of Gaite a surety
bond, and pursuant to the promise, Fonacier delivered to
Gaite a surety bond dated December 8, 1954 with himself
(Fonacier) as principal and the Larap Mines and
Smelting Co. and its stockholders George Krakower,
Segundina Vivas, Pacifico Escandor, Francisco Dante,
and Fernando Ty as sureties (Exhibit “A-1”). Gaite
testified, however, that when this bond was presented to
him by Fonacier together with the “Revocation of Power
of Attorney and Contract”, Exhibit “A”, on December 8,
1954, he refused to sign said Exhibit “A” unless another
bond underwritten by a bonding company was put up by
defendants to secure the payment of the P65,000.00
balance of the price of the iron ore in the stockpiles in the
mining claims. Hence, a second bond, also dated
December 8, 1954 (Exhibit “B”), was executed by the
same parties to the first bond Exhibit “A-1”, with the Far
Eastern Surety and Insurance Co. as additional surety,
but it provided that the liability of the surety company
would attach only when there had been an actual sale of
iron ore by the Larap Mines & Smelting Co. for an
amount of not less than P65,000.00, and that,
furthermore, the liability of said surety company would
automatically expire on December 8, 1955. Both bonds
were attached to the “Revocation of Power of Attorney
and Contract”, Exhibit “A”, and made integral parts
thereof.
On the same day that Fonacier revoked the power of
attorney he gave to Gaite and the two executed and
signed the “Revocation of Power of Attorney and
Contract”, Exhibit “A”, Fonacier entered into a “Contract
of Mining Operation”, ceding, transferring, and
conveying unto the Larap Mines and Smelting Co., Inc.
the right to develop, exploit, and explore the mining
claims in question, together with the improvements
therein and the use of the name “Larap Iron Mines” and
its goodwill, in consideration of certain royalties.
Fonacier likewise transferred, in the same document, the
complete title to the approximately 24,000 tons of iron
ore which he acquired from Gaite, to the Larap Mines &
Smelting Co., in consideration for the signing by the
company and its stockholders of the
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REPORTS ANNOTATED
Gaite vs. Fonacier
surety bonds delivered by Fonacier to Gaite (Record on
Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit “B”
expired with respect to the Far Eastern Surety and
Insurance Company, no sale of the approximately 24,000
tons of iron ore had been made by the Larap Mines &
Smelting Co., Inc., nor had the P65,000.00 balance of the
price of said ore been paid to Gaite by Fonacier and his
sureties payment of said amount, on the theory that they
had lost right to make use of the period given them when
their bond, Exhibit “B” automatically expired (Exhibits
“C” to “C-24”). And when Fonacier and his sureties failed
to pay as demanded by Gaite, the latter filed the present
complaint against them in the Court of First Instance of
Manila (Civil Case No. 29310) for the payment of the
P65,000.00 balance of the price of the ore, consequential
damages, and attorney’s fees.
All the defendants except Francisco Dante set up the
uniform defense that the obligation sued upon by Gaite
was subject to a condition that the amount of P65,000.00
would be payable out of the first letter of credit covering
the first shipment of iron ore and/or the first amount
derived from the local sale of the iron ore by the Larap
Mines & Smelting Co., Inc.; that up to the time of the
filing of the complaint, no sale of the iron ore had been
made, hence the condition had not yet been fulfilled; and
that consequently, the obligation was not yet due and
demandable. Defendant Fonacier also contended that
only 7,573 tons of the estimated 24,000 tons of iron ore
sold to him by Gaite was actually delivered, and
counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the
presentation of evidence to two issues:
1. (1)Whether or not the obligation of Fonacier and his
sureties to pay Gaite P65,000.00 become due and
demandable when the defendants failed to renew
the surety bond underwritten by the Far Eastern
Surety and Insurance Co., Inc. (Exhibit “B”), which
expired on December 8, 1955; and
2. (2)Whether the estimated 24,000 tons of iron ore
sold
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VOL. 2, JULY 31, 1961 835
Gaite vs. Fonacier
1. by plaintiff Gaite to defendant Fonacier were
actually in existence in the mining claims when
these parties executed the “Revocation of Power of
Attorney and Contract”, Exhibit “A”.
On the first question, the lower court held that the
obligation of the defendants to pay plaintiff the
P65,000.00 balance of the price of the approximately
24,000 tons of iron ore was one with a term: i.e., that it
would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or
before December 8, 1955; that the giving of security was
a condition precedent to Gaite’s giving of credit to
defendants; and that as the latter failed to put up a good
and sufficient security in lieu of the Far Eastern Surety
bond (Exhibit “B”) which expired on December 8, 1955,
the obligation became due and demandable under Article
1198 of the New Civil Code.
 As to the second question, the lower court found that
plaintiff Gaite did have approximately 24,000 tons of iron
ore at the mining claims in question at the time of the
execution of the contract Exhibit “A”.
Judgment was, accordingly, rendered in favor of
plaintiff Gaite ordering defendants to pay him, jointly
and severally, P65,000.00 with interest at 6% per annum
from December 9, 1955 until full payment, plus costs.
From this judgment, defendants jointly appealed to this
Court.
During the pendency of this appeal, several incidental
motions were presented for resolution: a motion to
declare the appellants Larap Mines & Smelting Co., Inc.
and George Krakower in contempt, filed by appellant
Fonacier, and two motions to dismiss the appeal as
having become academic and a motion for new trial
and/or to take judicial notice of certain documents, filed
by appellee Gaite. The motion for contempt is
unmeritorious because the main allegation therein that
the appellants Larap Mines & Smelting Co., Inc. and
Krakower had sold the iron ore here in question, which
allegedly is “property in litigation”, has not been
substantiated; and even if true, does not make these
appellants guilty of contempt, because what is under
litigation in this appeal is appellee Gaite’s right to the
payment of the balance of the price of the ore, and not the
iron ore
836
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REPORTS ANNOTATED
Gaite vs. Fonacier
itself. As for the several motions presented by appellee
Gaite, it is unnecessary to resolve these motions in view
of the result that we have reached in this case, which we
shall hereafter discuss.
 The main issues presented by appellants in this appeal
are:
1. (1)that the lower court erred in holding that the
obligation of appellant Fonacier to pay appellee
Gaite the P65,-000.00 (balance of the price of the
iron ore in question) is one with a period or term and
not one with a suspensive condition, and that the
term expired on December 8, 1955; and
2. (2)that the lower court erred in not holding that
there were only 10,954.5 tons in the stockpiles of
iron ore sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following
provision in the contract Exhibit “A”:
“7. That Fernando Gaite or Larap Iron Mines hereby transfers
to Isabelo F. Fonacier all his rights and interests over the
24,000 tons of iron ore, more or less, above-referred to together
with all his rights and interests to operate the mine in
consideration of the sum of SEVENTY-FIVE THOUSAND
PESOS (P75,000.00) which the latter binds to pay as follows:
1. a.TEN THOUSAND PESOS (P10,000.00) will be paid
upon the signing of this agreement.
2. b.The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first letter of
credit covering the first shipment of iron ores and/or the
first amount derived from the local sale of iron ore made
by the Larap Mines & Smelting Co., Inc., its assigns,
administrators, or successors in interest.”

We find the court below to be legally correct in holding

that the shipment or local sale of the iron ore is not a
condition precedent (or suspensive) to the payment of the
balance of P65,000.00, but was only a suspensive period
or term. What characterizes a conditional obligation is
the fact that its efficacy or obligatory force (as
distinguished from its demandability) is subordinated to
the happening of a future and uncertain event; so that if
the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never
existed. That the parties to the contract Exhibit “A” did
not in-
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VOL. 2, JULY 31, 1961 837
Gaite vs. Fonacier
tend any such state of things to prevail is supported by
several circumstances:
1. 1)The words of the contract express no contingency
in the buyer‘s obligation to pay: “The balance of
SixtyFive Thousand Pesos (P65,000.00) will be
paid out of the first letter of credit covering the first
shipment of iron ores x x x” etc. There is no
uncertainty that the payment will have to be made
sooner or later; what is undetermined is merely
the exact date at which it will be made. By the very
terms of the contract, therefore, the existence of the
obligation to pay is recognized; only
its maturity or demandability is deferred.
2. 2)A contract of sale is normally commutative and
onerous: not only does each one of the parties
assume a correlative obligation (the seller to deliver
and transfer ownership of the thing sold and the
buyer to pay the price), but each party anticipates
performance by the other from the very start. While
in a sale the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other
understands that he assumes the risk of receiving
nothing for what he gives (as in the case of a sale of
hopes or expectations, emptio spei), it is not in the
usual course of business to do so; hence, the
contingent character of the obligation must clearly
appear. Nothing is found in the record to evidence
that Gaite desired or assumed to run the risk of
 losing his right over the ore without getting paid for
it, or that Fonacier understood that Gaite assumed
any such risk. This is proved by the fact that Gaite
insisted on a bond to guarantee payment of the
P65,000.00, and not only upon a bond by Fonacier,
the Larap Mines & Smelting Co., and the company’s
stockholders, but also on one by a surety company;
and the fact that appellants did put up such bonds
indicates that they admitted the definite existence
of their obligation to pay the balance of P65,000.00.
3. 3)To subordinate the obligation to pay the remaining
P65,000.00 to the sale or shipment of the ore as a
condition precedent, would be tantamount to leaving
the payment at the discretion of the debtor, for the
sale or shipment could not be made unless the
appellants took steps to sell the ore.
838
838 SUPREME COURT
REPORTS ANNOTATED
Gaite vs. Fonacier
Appellants would thus be able to postpone payment
indefinitely. The desirability of avoiding such a
construction of the contract Exhibit “A” needs no
stressing.
1. 4)Assuming that there could be doubt whether by
the wording of the contract the parties intended a
suspensive condition or a suspensive period (dies ad
quem) for the payment of the P65,000.00, the rules
of interpretation would incline the scales in favor of
“the greater reciprocity of interests”, since sale is
essentially onerous. The Civil Code of the
Philippines, Article 1378, paragraph 1, in
fine, provides:
“if the contract is onerous, the doubt shall be settled in favor of
the greatest reciprocity of interests.”
and there can be no question that greater reciprocity
obtains if the buyer’s obligation is deemed to be actually
existing, with only its maturity (due date) postponed or
deferred, that if such obligation were viewed as non-
existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale
of the ore to Fonacier was a sale on credit, and not an
aleatory contract where the transferor, Gaite, would
assume the risk of not being paid at all; and that the
previous sale or shipment of the ore was not a suspensive
condition for the payment of the balance of the agreed
price, but was intended merely to fix the future date of
the payment.
This issue settled, the next point of inquiry is whether
appellants, Fonacier and his sureties, still have the right
to insist that Gaite should wait for the sale or shipment
of the ore before receiving payment; or, in other words,
whether or not they are entitled to take full advantage of
the period granted them for making the payment.
We agree with the court below that the appellants have
forfeited the right to compel Gaite to wait for the sale of
the ore before receiving payment of the balance of P65,-
000.00, because of their failure to renew the bond of the
Far Eastern Surety Company or else replace it with an
equivalent guarantee. The expiration of the bonding
company’s undertaking on December 8, 1955
substantially reduced the security of the vendor’s rights
as creditor for
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VOL. 2, JULY 31, 1961 839
Gaite vs. Fonacier
the unpaid P65,000.00, a security that Gaite considered
essential and upon which he had insisted when he
executed the deed of sale of the ore to Fonacier (Exhibit
“A”). The case squarely comes under paragraphs 2 and 3
of Article 1198 of the Civil Code of the Philippines:
1. (1)x x x
2. (2)When he does not furnish to the creditor the
guaranties or securities which he has promised.
3. (3)When by his own acts he has impaired said
guaranties or securities after their establishment,
and when through fortuitous event they disappear,
unless he immediately gives new ones equally
satisfactory.”
Appellants’ failure to renew or extend the surety
company’s bond upon its expiration plainly impaired the
securities given to the creditor (appellee Gaite), unless
immediately renewed or replaced.
There is no merit in appellants’ argument that Gaite’s
acceptance of the surety company’s bond with full
knowledge that on its face it would automatically expire
within one year was a waiver of its renewal after the
expiration date. No such waiver could have been
intended, for Gaite stood to lose and had nothing to gain
barely; and if there was any, it could be rationally
explained only if the appellants had agreed to sell the ore
and pay Gaite before the surety company’s bond expired
on December 8, 1955. But in the latter case the
defendants-appellants’ obligation to pay became absolute
after one year from the transfer of the ore to Fonacier by
virtue of the deed Exhibit “A.”
All the alternatives, therefore, lead to the same result:
that Gaite acted within his rights in demanding payment
and instituting this action one year from and after the
contract (Exhibit “A”) was executed, either because the
appellant debtors had impaired the securities originally
given and thereby forfeited any further time within
which to pay; or because the term of payment was
originally of no more than one year, and the balance of
P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is
whether there were really 24,000 tons of iron ore in the
stockpiles sold by appellee Gaite to appellant Fonacier,
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REPORTS ANNOTATED
Gaite vs. Fonacier
and whether, if there had been a short-delivery as
claimed by appellants, they are entitled to the payment
of damages, we must, at the outset, stress two
things: first, that this is a case of a sale of a specific mass
of fungible goods for a single price or a lump sum, the
quantity of “24,000 tons of iron ore, more or less,” stated
in the contract Exhibit “A”, being a mere estimate by the
parties of the total tonnage weight of the mass;
and second, that the evidence shows that neither of the
parties had actually measured or weighed the mass, so
that they both tried to arrive at the total quantity by
making an estimate of the volume thereof in cubic meters
and then multiplying it by the estimated weight per ton
of each cubic meter.
The sale between the parties is a sale of a specific mass
of iron ore because no provision was made in their
contract for the measuring or weighing of the ore sold in
order to complete or perfect the sale, nor was the price of
P75,-000.00 agreed upon by the parties based upon any
such measurement. (see Art. 1480, second par., New Civil
Code). The subject matter of the sale is, therefore, a
determinate object, the mass, and not the actual number
of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith to
his buyer all of the ore found in the mass,
notwithstanding that the quantity delivered is less than
the amount estimated by them (Mobile Machinery &
Supply Co., Inc. vs. York Oilfield Salvage Co., Inc., 171
So. 872, applying art. 2459 of the Louisiana Civil Code).
There is no charge in this case that Gaite did not deliver
to appellants all the ore found in the stockpiles in the
mining claims in question; Gaite had, therefore, complied
with his promise to deliver, and appellants in turn are
bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and
appellants undertook to buy, not a definite mass, but
approximately 24,000 tons of ore, so that any substantial
difference in this quantity promised and the quantity
delivered would entitle the buyers to recover damages for
the short-delivery, was there really a short-delivery in
this case?
We think not. As already stated, neither of the parties
had actually measured or weighed the whole mass of ore
841
VOL. 2, JULY 31, 1961 841
Gaite vs. Fonacier
cubic meter by cubic meter, or ton by ton. Both parties
predicate their respective claims only upon an estimated
number of cubic meters of ore multiplied by the average
tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of
7,375 cubic meters in the stockpiles of ore that he sold to
Fonacier, while appellants contend that by actual
measurement, their witness Cipriano Manlangit found
the total volume of ore in the stockpiles to be only 6.609
cubic meters. As to the average weight in tons per cubic
meter, the parties are again in disagreement, with
appellants claiming the correct tonnage factor to be 2.18
tons to a cubic meter, while appellee Gaite claims that
the correct tonnage factor is about 3.7.
In the face of the conflict of evidence, we take as the
most reliable estimate of the tonnage factor of iron ore in
this case to be that made by Leopoldo F. Abad, chief of
the Mines and Metallurgical Division of the Bureau of
Mines, a government pensionado to the States and a
mining engineering graduate of the Universities of
Nevada and California, with almost 22 years of
experience in the Bureau of Mines. This witness placed
the tonnage factor of every cubic meter of iron ore at
between 3 metric tons as minimum to 5 metric tons as
maximum. This estimate, in turn, closely corresponds to
the average tonnage factor of 3.3 adopted in his corrected
report (Exhibits “FF” and “FF-1”) by engineer Nemesio
Gamatero, who was sent by the Bureau of Mines to the
mining claims involved at the request of appellant
Krakower, precisely to make an official estimate of the
amount of iron ore in Gaite’s stockpiles after the dispute
arose.
Even granting, then, that the estimate of 6,609 cubic
meters of ore in the stockpiles made by appellants’
witness Cipriano Manlangit is correct, if we multiply it
by the average tonnage factor of 3.3 tons to a cubic meter,
the product is 21,809.7 tons, which is not very far from
the estimate of 24,000 tons made by appellee Gaite,
considering that actual weighing of each unit of the mass
was practically impossible, so that a reasonable
percentage of error should be allowed anyone making an
estimate of the exact quantity in tons found in the mass.
It must
842
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REPORTS ANNOTATED
Lazatin vs. Twaño
stated the amount to be 24,000 tons, more or
less. (ch. Pine River Logging & Improvement Co. vs. U.S.,
279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case
as would entitle appellants to the payment of damages,
nor could Gaite have been guilty of any fraud in making
any misrepresentation to appellants as to the total
quantity of ore in the stockpiles of the mining claims in
question, as charged by appellants, since Gaite’s
estimate appears to be substantially correct.
WHEREFORE, finding no error in the decision
appealed from, we hereby affirm the same, with costs
against appellants.
Bengzon,
C.J., Padilla, Labrador, Concepcion, Barrera, Paredes,
Dizon, De Leonand Natividad, JJ., concur.
Decision affirmed.
Notes.—A contract whereby a party obligates himself
to sell for a price certain specified quantity of sugar of a
given quality, without designating any particular lot of
sugar, is not perfected until the quantity agreed upon has
been selected and is capable of being physically
designated and distinguished from all other sugar. Until
thus segregated or appropriated, the vendee does not
assume the risk of loss as provided in Article 1452 (now
Art. 1480, N.C.C.) of the Civil Code. (Yu Tek & Co. v.
Gonzales, 29 Phil. 384).
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